Does Birth Control Coverage Pay for Itself?

The Supreme Court took two actions on contraceptive coverage last week that have, appropriately, received considerable attention. But there’s a health economics question in the background that warrants some attention as well: Does contraceptive coverage pay for itself?

In his opinion last Monday, Justice Alito referred to an assertion made by the departments of the Treasury, Labor, and Health and Human Services that “providing payments for contraceptive services is cost neutral for issuers. Several studies have estimated that the costs of providing contraceptive coverage are balanced by cost savings from lower pregnancy-related costs and from improvements in women’s health.”

Studies the departments cited are suggestive, but far from definitive. A fuller review of the literature on the cost and cost offsets of contraceptive coverage by Daniel Liebman, a colleague, finds that the evidence is thin that, from an insurer's perspective, contraceptive coverage pays for itself in the long term. Moreover, it almost certainly does not in the short. The cost of contraceptive coverage is immediate, and the possible offsets (reduced pregnancies) are downstream, often years in the future.

A Department of Health and Human Services Issue Brief offered by the administration reported that there was no premium increase associated with the addition of a contraceptive coverage mandate in the Federal Employees Health Benefits Plan in 1999. The Issue Brief also cited an analysis of Hawaii’s 1999 requirement that employer plans cover contraception. Based on an examination of just four health plans, the state’s insurance commissioner concluded that the mandate “did not appear to have a direct effect on an increase in the cost of health insurance.” However, this conclusion is hedged; the detailed results from each of those four plans do not unambiguously support it.

However, the Medicaid population is not the same as a typical, employed population, which is at issue in the cases considered by the Supreme Court last week. Additionally, contraception is not the same as contraceptive coverage. In part because it is so cost-effective, most people are willing to pay for contraception with their own money, if they can afford to. (Many Medicaid-eligible individuals perhaps cannot, but most employed people probably can.) Insurers benefit from this, because every pregnancy avoided is one less they have to pay for.

Therefore, when employer-sponsored insurers pick up the tab for contraception, not very many more pregnancies are avoided — most people were already using and paying for contraception. According to the IMS Institute for Healthcare Informatics, though the proportion of Americans with no cost-sharing for contraceptives rose in 2013 to 50 percent from 20 percent, prescriptions written for contraceptive medications increased only 4.6 percent.

But when they begin to fully cover contraception, insurers take on its full cost, “crowding out” the willingness of individuals to self-insure for it. Therefore, the government’s accommodation of religious organizations’ objections to covering contraception (obliging insurance companies to pick up the cost of the coverage, with no offsetting premiums or cost-sharing from either employees or employers) may impose a cost on insurers, even though contraception is cost-effective for society as a whole.

The majority of the Supreme Court is correct in saying that the government has other means to ensure that women receive contraceptive coverage. But it is far less clear that that that coverage would be without cost, and it almost certainly would not be in the short term.

We’ve gotten used to contraceptive coverage as a legal, religious, and, perhaps, a moral issue. As much as the administration might hope otherwise, for insurers, it seems to be a financial one as well.